And that division of his time was just one factor in his decision to sell the REIT to ProLogis for $1.6 billion in August 2004. Now as chairman and CEO of KTR Capital, Kelter calls the decision to exit the public market the correct move.

Speaking at NYU's 11th Annual REIT Symposium, Kelter and other industry leaders addressed the trend of REITs trading hands, the lessons to the be learned and the risks involved. And REITs may face the challenges the moment executives announce they are exploring options, including whether or not to sell.

"There are risks to marketing a company before there is a real commitment to sell," explained Matthew Lustig, managing director of Lazard Group LLC. For example, there is always the possibility of disrupting the work force leading to a loss of morale. But, on the other side, making a possible sale public knowledge can lead to a bidding war, like the recent sale of Town & Country Trust.

"A lot of people say 'explore the sale'," added Michael Graziano, managing director of Goldman Sachs. "But it's a lot easier said than done. It may get a ball rolling that you can't stop."

And Kelter agrees. "Once you start the process a company is getting sold." He explained that Keystone never went public with the sale option, choosing instead to give less than a handful of potential buyers a couple of weeks to get a deal done or "I'm going to go run my company."

Both potential sellers and buyers also run up against analysts reports that may not be aware of a company's full situation, affecting pricing. According to Jeff Barclay, managing director of ING Clarion, his company had the advantage of seeing the potential to sell large parts of the Gables Residential portfolio to private investors when investigating ING's eventual acquisition of the multifamily REIT. In addition, ING saw a development pipeline that may not necessarily have been a source of value in stock, but that offered "tremendous value" in private hands, Barclay said. "We've executed the sale strategy that could be done in our private hands." He added the deal has "exceeded our expectations."

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Trading REITs Face Challenges in Marketplace

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